Companies

Skoda-VW begins slow and steady drive to normalcy

Murali Gopalan Mumbai | Updated on June 08, 2020

Gurpratap Boparai, Managing Director, Skoda Auto Volkswagen India

Managing Director Gurpratap Boparai outlines the challenges ahead

As the automotive industry gradually resumes operations across the country, Gurpratap Boparai says it is going to be a challenging haul ahead.

“We are limping back but it will take time,” says the Managing Director of Skoda Auto Volkswagen India. The process will involve additional costs since “we are spending much more building the same number of cars”.

This is because the plant at Chakan near Pune will not be operating at optimal capacity given that social distancing needs to be maintained on the shop floor. In short, it will cost more to keep employees at work. “Yet, these things are paramount since we will never compromise on safety,” reiterates Boparai.

Lockdown impact

Beyond this, the other reality to reckon with is that the market is still slow with customers afraid to venture outdoors. Additionally, they are not likely to spend big money in a time of salary cuts and job losses.

From the viewpoint of sourcing components, the bigger risk emanates from India since operations have resumed in other parts of the world with supply chain security strongly in place. Some top Indian suppliers are in containment zones while many others are on the verge of bankruptcy.

“The situation here is more challenging. Getting parts from local suppliers is tougher than sourcing them from outside,” says Boparai.

The easing of the lockdown is also happening at a time when infections from Covid-19 are rising in India which could means that things may not pick up for another three months. “With the wisdom of hindsight, we could have opened earlier but it is a tough call when daily infections are increasing,” says Boparai.

Rough period ahead

With the auto sector now gearing up for a rough period ahead, the last thing it needs is an ad hoc announcement from the Centre that will create needless disruption. “I believe revival of the industry should be the top priority,” he says.

In his view, there there is really no point mandating new investments when plenty has already been spent on Bharat Stage VI technology. “Industry needs time to recover these costs and this will take far longer than we may think,” says Boparai.

For one, manufacturers cannot really go in for steep price hikes right now which simply means that “you will recover much less per car than you were earlier”. Two, they also need to be prepared for low levels of sales since positive market sentiment will take time in coming. “This is a double whammy where you cannot have the ideal price and will not be selling enough either,” elaborates Boparai.

In this grim backdrop, Skoda Auto Volkswagen India has some cause for cheer with its manufacturing facility scheduled to become water-positive by the end of this year. As part of the environment drive, nearly 30 per cent of its energy needs are being derived from solar power.

“Our midterm goal is to make our manufacturing carbon neutral by 2025,” says Boparai. The target for the Volkswagen Group globally is 2030 which means the Indian operations are five years ahead of the curve.

The subject of clean air has also been reinforced during the lockdown when the quality of air and water has distinctly improved. “Covid-19 has its short-term lessons for sure where it has shown how the earth can recover quickly if all activities stop,” concedes Boparai.

Yet, this has come at the cost of stopping economic activity which means a balance needs to be struck going forward. “We must continue on a sustained path of reducing pollution,” he says.

E-mobility

While electric mobility is a key component of this roadmap, this will take longer to materialise in India. According to Boparai, 2030 could be a “more realistic” timeline to target a 20 per cent share for electric vehicles.

“This is when the benefits will start accruing…till then, cost of ownership is something that people will feel sensitive about and rightly so,” he says. For now, the equation today is not in favour of EVs in India where the levels of purchasing power are lower than China and the West.

Across the world, there is anger mounting against China on the Covid-19 spread with countries insisting on creating alternative supply sources. “There is no magic bullet and you just cannot reverse globalisation overnight” says Boparai. The economics can “only work” with scale in place and, at 2.5 million units (a tenth of China), India’s auto market is clearly not big enough to make this happen.

Published on June 08, 2020

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